Xerox nudges HP toward Hewlett-Packard’s fate

After a relatively friendly offer to purchase HP Inc., Xerox has sent another offer to the side of HP that makes PCs and printing products. HPQ, as the stock markets know this side of Hewlett-Packard, replied with a refusal. Industry finance analysts think there’s a chance the takeover could roll into a proxy fight, where shareholders are led toward a vote on the future of a corporation.

Leading shareholders to such a vote is what split HP into two parts, ultimately. It’s also the event that took Tru64 into deep shadows at HP and ensured OpenVMS would get enough engineering attention to make its way onto 64-bit servers. It wasn’t enough to keep OpenVMS at HP Enterprise, though. These kinds of mergers can be harmful to some customers.

Let us review. About 20 years ago HP shopped for a new CEO to replace Lew Platt, an HP lifer whose term included the years when HP missed the Web revolution and failed to lift its PC business into parity with Dell and Compaq. HP could do something about the latter. About two years after new CEO Carly Fiorina took her job, a blockbuster merger rose out of the imaginations of Fiorina and her board of directors. HP was buying Compaq, whose assets included OpenVMS.

There were good Digital people inside Compaq, rolled in with the rest of Digital’s assets that Compaq bought. Enterprise computing technical teams had new management. OpenVMS was easily a 400,000 server market at the time. When HP proposed it would absorb Compaq, the $25 billion merger hit shareholder roadblocks. HP had never aquired anything so big, or so voracious, as Compaq. The OpenVMS community had adapted to losing their vendor’s primary focus on VMS after the Compaq merger. This would be their second merger in three years.

HP’s shareholders, including the family of founder Bill Hewlett, fought back. Hewlett’s son resigned his seat on HP’s board, and within a few months of announcing the merger — agreed upon by Compaq’s leaders and HP’s — a proxy battle exploded into open warfare. A vote in the weeks after the annual HP shareholder meeting in 2002 decided Compaq’s fate, as well as the future owner of VMS.

The merger’s flaw was there was little margin in PC success. Anyone could have told shareholders about this during the proxy fight. By 2014 HP’s solution was to cut loose the unit that Xerox is trying to buy now. HP Inc. was born and Hewlett-Packard Enterprise was left over. By 2016 OpenVMS was in the chute toward ex-product status at HP. The coup de gras took place this year when support customers were told the future was in the hands of VMS Software, Inc.

Owners of OpenVMS, and even more so, Tru64 systems, can look back to see how a proxy fight led created a vendor that couldn’t sustain enterprise business alongside commodity computing. Proxy battles reveal a company’s soul, usually rooted in the hearts of the forces resisting the merger. It didn’t work out well in the last HP battle.

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